Friday, April 18, 2014

In Wake of Churchill’s Takeout Rise, Talk of Boycott Intensifies

SARATOGA SPRINGS, NY, April 17, 2014—I was trying to think of a possible headline to address the recent takeout increase at the upcoming Churchill Downs spring meet and “tone deaf” immediately came to mind.

Almost instantly, however, that description was too moderate to define this absolute unknowing decision in terms of what’s been learned about the economics of parimutuel takeout in recent years.

HorseRaceInsider has written extensively on this subject since 2010. What I have to say now I’ve said over and over and over and over again. Other websites and bloggers have done the same during the same period of time.

Can racetrack institutions and horsemen’s groups really be this obtuse?

Horseplayers often disagree; it’s in their DNA, their differences making all things a horse race. On this topic, however, they speak with one voice, with the exception of the top four or five percent that account for roughly 25 percent of total handle.

Those bettors, and the tracks that covet and woo them, do so via a rebate system that reimburses personal handle somewhere in the neighborhood of 8 percent. It’s in their vested interest to keep takeout rates high.

They apparently never consider that the laws of diminishing returns will hurt them in the long term. But never mind the long term; get the quick fox now and the hell with tomorrow.

Our position, as Cary Fotias always explained, is that a takeout reduction is the universal rebate the game needs to survive, much less prosper.

If rebates to the best customers were THE answer, why hasn’t this approach helped put a fiscal finger in the dike of a national handle decline of 30 percent in non-inflation-adjusted dollars since reaching its zenith of $15.1 billion in 2003?

The causes for racing’s slide are myriad and can be recited from memory by anyone even remotely tethered to the industry. Undeniably, the biggest reason is that the game’s rank and file have been walking away in droves. And why?

Because they are losing their money at a faster rate than any other popular form of gambling that benefits from residue of “square money.” If racing is to survive its challenges, keeping the fan base liquid longer is a must.

With continued high takeout, the “sharps” will continue to cannibalize each other. As the fictional Larry the Liquidator once opined: continue taking a bigger slice from a smaller pie, down the tubes.”

Unlike Churchill Downs Inc., there are other wagering companies that get it and have done something about it: The introduction of a fractional low-takeout “Players Pick 5” at Santa Anita reversed the negative trends created by the player boycott of 2010.

Die by the Horseplayers Association of North America, who supported the Santa Anita boycott; live by the Horseplayers Association of North America, who introduced the Players Pick 5 concept. *The boycott was spearheaded by the Players

In that case, and virtually all others, lower-takeout fractional bets have not only grown handle significantly but has had positive, unintended consequences of increasing handle in the vertical pools of “Pick” races and in its sub-sets--Pick 4, Pick 3 and Doubles—working at once as an optimizing and hedging mechanism.

The unintended bad consequence is that, even for top “Pick” practitioners, it’s a long time between drinks. Without a significant bankroll, it’s nearly impossible for the average bettor, defined here as a fan starting with $200 per wagering session, to sustain droughts.

There never have been long term studies of the effects a reduced takeout. Tracks, horsemen and the states simply don’t have the patience or believe they’re entitled.

However, every significant short-term study I’ve seen, dating back to the 1970s in New York, has shown that reduced takeout increases churn, understanding that the more money returned to winning bettors the more they bet in return. Call it human nature.

The problem with low takeout “Pick” wagers is that they don’t allow for churn in straight pools and betting to win only is still the most efficient route to horseplaying success. Unfortunately, we’ve become so inured to instant gratification that making a score via complex wagers proves too tempting and for casual players and weekend warriors, too much fun.

The rake on losing wagers remains 100 percent.

With respect to the Churchill increase, it’s amazing how non-gambling execs put pen to paper and came up with a percentage increase they believe will raise money for purses and increase revenue, hanging their decision on the Derby’s extreme popularity.

The problem comes in the Fall meet when lower handle will result in reduced purses or fewer races.

If Churchill executives haven’t learned anything from the past re the economics of player liquidity and churn, they probably also are underestimating the resolve of today’s horseplayers that have become an Internet force to be reckoned with.

Horseplayers, through the auspices of HANA and various social media are united as never before. Chat rooms, forums and player-centric sites like HRI are full of players set to boycott Churchill Downs racing, including the Kentucky Derby.

Many of those have closed their Twinspires wagering accounts and the idea of an organized boycott is gaining momentum. Players have demonstrated their disapproval in the past by not supporting racetracks they view as player-hostile, choosing instead to make their wagers on player-friendly circuits.

For an example of how increased takeout results in handle loss and vice versa, the Equinometry website has a comprehensive study based on the California that goes beyond the player boycott at Santa Anita’s in 2010 into 2011. The trend began to reverse in 2012 and 2013 due to the low-takeout Pick 5 cited above. (

Parenthetically, checkout Tom LaMarra's Wednesday post on the Bloodhorse site which contains excellent background on simulcasting.

While CDI is certain to make revenue gains in the short term because of the unusually high number of Oaks-Derby fans, price sensitivity won’t be a strong factor until Fall when rank and file horseplayers again will dominate the pools.

To reiterate: Increasing takeout decreases handle. Lowering takeout increases handle. Boycotts have been very effective in the past and players are more united than ever. Very interested to see how this one shakes out going forward.

*Correction addendum posted 10:33 am 041814

Written by John Pricci

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Wednesday, April 09, 2014

Slouching Towards Louisville

SOUTH OZONE PARK, NY, April 8, 2014—It is said that you can’t go home again. Despite the inherent wisdom in that adage, I left the warm, sunny climes of South Florida for Queens, the next meaningful Eastern stop on the road to the Kentucky Derby.

I must confess that when I entered the building I didn’t know what I would find. The news emanating from New York to reach Gulfstream Park this winter, both on and off the record, was disturbing but, unfortunately, not totally unexpected.

When I arrived at the press box level of Aqueduct Race Track over the weekend, I discovered newly installed carpet under foot and a fresh coat of paint on the walls leading to the press office and press box.

It was a welcome sight from the blight that had become the norm, the result of an acrimonious relationship between “new NYRA” and the Genting organization that now occupies the swanky part of the building formerly known as the Aqueduct grandstand.

Perhaps not surprising but somewhat amusing was the fact that the new paint job didn’t extend all the way through to the fifth level where the stewards and Equibase chart callers live and where Tom Durkin would later call his penultimate Wood Memorial.

And you thought David Letterman would be the only prominent retiree come 2015?

The incomplete paint job is reminiscent of the scene from “The Sting” where Kid Twist would put the final hook in Doyle Lonnegan with a visit to a makeshift telegraph office that ultimately would provide misleading post-posting information.

You may recall “I said place it on Lucky Dan, that horse is going to finish second!”

After entering the press box my first instinct was to visit with Jerry Bossert. If it weren’t for the Daily News’ Aqueduct “expose” he inspired, I might have been returning to the unhealthy work space I left behind following Holidayfest weekend last fall.

“I had been [privately] complaining about this for months,” Bossert explained.

“Jerry, you did a hell of a paint job,” I would later say, “and my body thanks you for having the hole in the roof repaired and the pigeon droppings scraped off the walls.”

“You can still see some feathers once in a while,” he said.

On occasions such as the Wood Memorial these days, you still can find a press box full of reporters there for the big race. One of those media members was Steven Crist, who was blogging live from Aqueduct.

Editorially, Steven and I often stand at about 180 degrees but a racetrack press box is a lot like the jock’s room; friendly competitors having mutual respect for one another. In our case, it might be more aptly described as friendly parimutuel respect.

Knowing I would find a sympathetic ear, I told Steve about my first losing season in the last four years at Gulfstream Park.

“On one occasion, I mis-punched myself—you know how painful that can be. On another, I committed a horseplayer’s worst sin of all; making an error of omission, not commission. I lost my equilibrium after that and never got it back.”

Steve nodded. We’ve all been there.

I’m sure neither one of us thought that he would need to be rushed to Winthrop University Hospital the following day after he stopped breathing. Daily Racing Form reported him to be in critical but stable condition.

His friends and colleagues are holding a good thought.

Between races, five hours in advance of the 89th Wood, NYRA placing judge Sentell “Sonny” Taylor, surrounded by friends and family, was feted for his half century of service to the association, first as a clocker, then official timer and now as an official.

In the winners’ circle, master of ceremonies Richard Migliore introduced NYRA President Christopher Kay to make the presentation. But first, with Taylor standing there his side, Kay found it necessary to do two commercial minutes.

Kay informed his guests that NYRA had hired Luis Grandison as its new Spanish-language race caller, that NYRA had a new Roku HD channel and that “Longshots,” an attractive, state of the art simulcast facility, was now open for business.

It was like Saratoga 2013 all over again when Kay’s penchant for face time resulted in the late Paul Moran observing at that “the most dangerous place in Saratoga is the eight feet between Kay and a mini-cam.”

Kay finally got around to saluting Taylor on his 50 years of service although, as far as we could see, there were no time pieces to celebrate the occasion--not that the always nattily turned out Taylor was lacking in sartorial accoutrements.

It is no small irony that the ceremony came at the end of a week that saw two NYRA executives resign; Director of Communications Eric Wing and Chief Marketing Officer Rodnell Workman. Workman had been on the job 22 months; Wing was hired last April.

It was good to see the Big A’s press box, my first, filled with media, some who were lamenting the recent loss of 167 non-union jobs at the venerable Newark Star-Ledger. Its newsroom lost 40 of its 156 staffers.

“The one good thing about getting old is that there’s no longer a future in the newspaper business,” cracked DRF’s Mike Watchmaker.

Nonetheless, all of it made a press box old-schooler smile on Wood day 2014 when, after the official sign had been posted, the son of a Giant Killer stood in the winners’ circle fielding question after his horse upset more highly regarded rivals in the day’s big race.

Written by John Pricci

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Monday, April 07, 2014

HRI Derby Power 10: Sparkling in the California Sun

SOUTH OZONE PARK, NY, April 6, 2014—“You knock him, you just don’t like anything in life,” was the reaction of Hall of Famer Mike Smith, who finished second to California Chrome aboard Hopportunity in Saturday’s Santa Anita Derby.

And if they were being honest, PETA would tell you that they like him, too.

I know I like living too much to dare say something negative. The new California Comet was awesome on the day and I’ll wait until after the post draw to concern myself with any potential Louisville first-turn speed jams.

As all know, Santa Anita Park is a fast surface. But nine furlongs in 1:47.52 is racehorse time on anyone's racetrack. Efforts take their toll, no matter how facile the victory, But it certainly appeared, as Victor Espinoza said, that they haven’t gotten to the bottom of him yet.

They very likely will in four weeks time.

Hopportunity, needing no qualifying points, got a useful prep behind the current divisional leader. On balance, he had an easy time of it, but not so show finisher Candy Boy.

Clearly, Gary Stevens wanted to put some pressure on California Chrome to chase longshot Dublin Up in earnest, but the Santa Anita Derby favorite settled in comfortably off the leader's flank instead as Candy Boy remained parked in the three-path beneath Stevens' long pull.

When California Chrome cruised up alongside Dublin Up, Stevens put his mount in a drive even if he probably would have preferred to wait. The move forced him untenably wider into the stretch, but it wouldn't have mattered. By then the Comet had streaked away.

Candy Boy’s gallop-out was good and he is sure to benefit from Saturday’s run, especially coming off a 55-day absence. All the screws will be bolted down by May 3rd.

Wicked Strong peaked at exactly the right moment. His style and race dynamics gave him very little chance in two starts at Gulfstream Park, and he clearly enjoyed not hearing his feet rattle Saturday at Aqueduct.

He was comfortably into the bridle throughout and deftly guided around the course by Rajiv Maragh. It’s one thing to get a perfect trip; it’s another to take advantage of it. He should only move forward again and perhaps will have a bit more stretch focus in four weeks. Not to worry; Jimmy Jerkens has learned his lessons very well.

If Rick Violette is right about Samraat and his theory that tough races bring out the best in the best horses, then surely his colt's trip in the Wood will do him good. It certainly couldn’t hurt and he deserves the respect of a solid Derby contender.

The place photo lost by Social Inclusion is a blessing in disguise. The Derby is a unique test which would have proven to be too much, too soon for the lightly raced speedster. He did all the Wood dirty work but he lived to tell the tale.

Social Inclusion even briefly appeared to be a winner soon after entering the stretch before tiring, understandably. But to his credit he never stopped trying. Now back home in South Florida, he’ll be trading stone crabs for hard crabs in six weeks.

Intending no disrespect to the class of 2014 and unknown Kentucky Derby results notwithstanding, wouldn’t it be interesting to see the Florida Flash vs. the California Comet in Baltimore? Damn right it would.

Derby qualifying points aside, don’t know what I could possibly learn from Saturday’s upcoming Blue Grass Stakes. It certainly can have an effect on bubble horses such as Social Inclusion, Cairo Prince, etc. But while the Arkansas Derby is coming up light in number of potential entrants, there will be no dearth of talent in Hot Springs this weekend.

Six runners from a possible seven runners, as of early Monday morning, can make a serious impact in Louisville four weeks hence: Bayern, Commissioner, Conquest Titan, Ride On Curlin, Strong Mandate and Tapiture are all deserving of merit at this juncture.

We’ve been mentioning all spring how the HRI Kentucky Derby Power 10 is an amalgam of accomplishment and promise. Given the current final round of Derby preps, opinion is beginning to weigh more heavily on staff and contributors.

The HRI Derby Power 10, Week 7:

1. California Chrome (30)
2. Constitution (26)
3. Wicked Strong (24)
4. Candy Boy (18)
5. Tapiture (15)
6. tie-Samraat (12)
6. tie-Vicar’s In Trouble (12)
8. Hopportunity (9)
9. Intense Holiday (8)
10. Golden A Rod (7)

Written by John Pricci

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